Gold price correction will last for several months; buy on dips: Jim Rogers

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In an interview with ET Now, Jim Rogers, Chairman, Rogers Holdings, shares his outlook on commodities and the falling rupee. Excerpts:

Gold has been down 10% in the past week and is at an 8-week low today. Given this, what is your outlook for gold prices and do you see gold near $2000 per ounce in the near to medium term?

We have discussed before that gold has been up 10 years in a row, which is very unusual in any asset class. So if it is up this year or 11 years in a row, gold is overdue for a correction and it could have a nice substantial correction given that it has been so strong.

I have no idea what is going to happen this year. I doubt if it will go to $2000 an ounce in 2011, it is more likely to have a correction which will last for several weeks, several months. It has been very strong. If it goes down some more, I would buy more gold as I have told you many times.

Silver has been one of your favourites, but that is down 24% in the past week. Are you still buying?

Not yet, but if silver continues to go down as we have discussed before, I will buy more silver too. Do not sell your silver, do not sell your gold unless you are a short-term trader, but anybody who is in this for a long term, silver and gold will both go much higher over the next few years.

Then, let's talk about base metals. Copper has seen quite a drubbing down 30% over the last one month. Are you seeing more downside for most of these base metals?

That is a big big sell off, 30% in anything in that shorter period of time. So it is a shock, but I would expect most things to continue to correct and react because the world has got serious problems facing in the future. Base metals will be affected by reduced demand.

Other commodities will continue to do well, but base metals certainly would be affected by reduction in demand and you know what is happening in Europe, you know what is happening in America. So be careful. I am not selling any of my commodities. I am not selling my base metals, but I am not jumping in to buy either.

Tell us why do you believe precious metals are correcting? Do you believe this is just an unwinding of positions or a genuine slowdown in investment and safe haven demand?

No, it is panic, it is fear. When fear permeates a market, everybody sells, especially the last ones in, frequently have to jump out. They have raised margin requirements for both silver and gold. So that makes it more and more difficult for people to hold on.

I barely pay attention to the price, but I know a lot of people do and that is why you have these sudden spikes up and down.

Crude oil prices as well... They have been down close to 10% over the previous week. Do you think a current price display is also a fair price and also what is your view on the global demand as well as supply of crude oil?

Known reserves of crude continue to decline. We have serious problems facing us in a few years with crude oil. The surprise would be how high the price stays and how high gold is, eventually.

If the UK certainly goes bankrupt, there is some big shock to the system. Of course everything is going to go down for a while. That seems to be what is happening right now, but when they go down, you should prepare yourself to buy more because when markets snap back, the first things to snap back would be things like oil, gold and commodities.

Once we have seen a consolidation in prices, where do you believe we are going to see buying opportunities emerge first?

It will come in the commodities, probably agriculture will be bought first. I am thinking about buying agriculture right now. I am not thinking about buying base metals or gold or oil right now, but I am thinking of buying agriculture maybe this afternoon. Elsewhere the man who come first probably precious metals, second then the rest of the commodities.

So overall what you say is that the kind of correction that we have seen in commodities has been a surprise to you, were you expecting such a sharp fall?

Given that stock markets around the world are collapsing is not such a surprise, but to answer your question, no I certainly did not expect it to be this hard, this fast with commodities coming down, absolutely not.

Tell us what is the outlook going forward as large commodity consumers like the US and China are showing clear signs of slowing down?

I am thinking about buying agriculture as we speak. I own commodities. I am not selling any commodity. I have so short emerging markets and European stocks and American technology stocks, but I mainly long commodities and currencies. I would not sell commodities and if you need protection in your portfolio, I would think about buying commodities and you might even buy agriculture today or I might buy agriculture today.

Then what would be your strategy? Would it be different on agri-based commodities and different for industrial commodities like base metals and crude oil?

Agriculture is facing some very serious problems whether the world economy slows or not because we have shortages of everything. The inventories are very low. We even have shortages of farmers developing in many countries. The average age of farmers in America is 58, likewise Australia. In Japan, it is 66. You have hundreds of thousands of Indian farmers committing suicide. It has been such a terrible business. Higher suicide rate of any profession in the UK is in agriculture.

So farming has got serious problems facing it. We are going to see much much higher prices over the next decade. So I would buy agriculture soon. The others, I am more watching the world economy and the world markets before I step in.

But sugar is down 20% this month. What is your outlook over there?

I own sugar. it is part of the Rogers Index. I would expect sugar to go much higher over the next few years. Sugar is going to at least double or triple before this is over. Do not sell your sugar. Think about buying more.

Give us your assessment of the overall crisis in developed markets and that impact on respective currencies like the dollar as well as the euro.

I own the US dollar and as far as the emerging markets, I have sold them sure. I am short all emerging markets, basket of emerging markets. So I am not optimistic about emerging market stocks. I do own the dollar.

I bought the US dollar as we have discussed here before because everybody has been so pessimistic about it. I have no idea how long I will own the dollar, whether own it a day, a week, a year, I do not know. But I do own the US dollar as we speak.

Finally a word on the Indian rupee which has fallen to its lowest levels in over 2 years.

I know it has. I had noticed that. What has really happened is there is a flight into the US dollar, people would panic. Now the US dollar is not a safe haven. I assure you US dollar has got terrible problems and it is a very flawed currency, but in the panic, people are rushing into dollars because they do not know what else to do and that is going to continue to make the rupee and other currencies weak at least for a while.

Now there should be a rally in the rupee soon, but as long as people are terrified, they are going to run into places like Swiss frank or the yen or the US dollar. So be prepared for weak rupee for a while.